According to a strategist from JPMorgan Chase & Co, declining oil prices could serve as a significant catalyst for stock markets by reviving a broad-based rally that was interrupted by the Iran conflict.

JPMorgan Asset Management's chief market strategist for EMEA, Karen Ward, stated that oil could drop to $70 per barrel in the coming weeks. This projection is based on an emerging agreement between the US and Iran, which is expected to release frozen assets and increase global supply. She further noted that potential supply increases are not limited to Iran, as cohesion within OPEC weakens and Gulf states may look to capitalize on their reserves at current price levels.

This scenario would act as a substantial positive force for equity markets and might encourage central banks to lower interest rates. This perspective follows the European Central Bank's decision to increase rates by 25 basis points last week in response to inflation.

Ward explained to Bloomberg Television that the market rotation across sectors and regions observed last year was halted on February 27. She argued that the market has not fully moved past the Iran conflict, and the narrative has shifted entirely, leading to an unwinding and a resumption of that broadening rotation.

She indicated that the agreement, scheduled for formal signing on Friday, appears designed with incentives for both parties to adhere to its terms. Ward expects the deal to hold, partly because China, a major buyer of oil transported through the Strait of Hormuz, is unlikely to permit a sustained closure given its domestic economic challenges. She added that Iran moving oil from unofficial to official markets could further accelerate the price decline.

Brent crude fell sharply, dropping as much as 5% to under $83 a barrel on Monday. However, some market participants expressed caution, pointing to a lack of detailed agreement terms and logistical challenges for the shipping industry in resuming transit through the waterway.

Ward views European equities as undervalued, citing a change in tone from Brussels toward prioritizing growth after a period of restrictive policies. She concluded that excessive pessimism is still priced into European markets within a generally optimistic broader market environment.